Topic: What Do You Think of Pricing Software & Systems for Apartments?

I'm curious to know what others think and might be using. The main ones out there seem to be Rainmaker LRO, YieldStar, and RentMaximizer. Do you like it? Hate the idea? Do your prices change daily or weekly? Do you have certain techniques for presenting changing prices to prospects?

Of course hotels have been using it for years, and airlines for pricing seats. But it's not as widespread in the apartment industry...yet.

We like it. We were one of the first in our market to use Yieldstar three or so years ago so at first it was rough getting our Managers and prospects on board because we weren't offering concessions nor were we able to negotiate pricing like our competitors. Instead we flipped it to be presented in the manner of "be able to pick your own rent price" since different lease lengths and start dates would mean differnet pricing- if they were willing to be flexible with those things they could get a lower rate.

Our Managers really like it now because it takes all the guess work out of everything and it's a great closing tool "our prices change daily so this price is only good for today and tomorrow it may go up."

I really think it helps maximize rents but you have to be willing to strictly follow it because if you allow a bunch of exceptions and changes it really makes it less effective.

That is absolutely true. The more overrides and exceptions you use, the more you defeat the purpose.

I do agree that one should have good training in place. There are real specifics a leasing agent needs to explain changing pricing, especially in markets where the concept is new. In bigger cities people are understanding it.

I'd be curious to hear from anyone using Yardi's RentMaximizer.

Working in the multi-family property management industry for 10+ years, I like the idea behind LRO. Essentially it can increase overall profit during the leasing process, but only slightly in my opinion. You may be able to squeak out a few extra dollars on a lease contract from a prospect who may be uninformed with competitive marketing pricing or otherwise desperate to move. I do question the small increase in profit compared to the cost and support of the software. How long will the ROI take? 5 years? 10 years? At that point is it worth it? IMHO the only positive factor would be the reduced exposure to fair housing violations based on pricing.

On the flip side, I am also a renter (not at the community where I am employed)and for that reason I HATE LRO. I can deal with walking away from a leasing office and losing an apartment to someone else. However to come back a day later and the LRO price has increased $50 is ridiculous and predatory on a basic necessity such as housing. Although this software is used in the hotel and airline industry, neither of these industries are considered a basic necessity. Travel and lodging is considered a luxury - basic housing is not. LRO "IS" the hard sell. My personal philosophy is that your product should sell itself. When I make a decision about where to live I look at price, location, layout, amenities. Can you imagine if they used LRO to price turkeys at Thanksgiving or eggs during Easter. Demand is one thing, but to artificially inflate the price on a basic necessity based on a speculative demand is wrong.

You know, I think you bring up a very interesting point, MKC. We often talk about revenue management relative to airlines, but realistically, they have a lot more inventory than we do. So if a few seats are sold between one day and the next, the price difference may not be all that much. But for apartment communities, that could be a large percentage of our vacancy for a given unit, which would cause the price to jump quite a bit. (I haven't worked on the management side in a while, so I don't know how often a $50 jump is...)

So while it might make sense to have full ability to adjust to the market and current availability, could that create some pretty heavy price volatility for a single community? And if so, how does that impact the buying experience to prospects, like you mentioned?

"Your value doesn't decrease based on someone's inability to see your worth." Ted Rubin
I realize this doesn't usually get applied to property management, and certainly not to software, however, just as pricing can go up, it can go down as well. The pricing software can work to convey urgency in renting NOW (and yeah, a $50 jump is a lot in most markets)but it can also go down when a unit sits unrented for several days/weeks. When employing pricing systems, it's important to understand that: increases and decreases. Personally, I wonder about basic rent affordability in the housing arena, but that is for a different post. As long as the Leasing Specialist understand how it works, he should be able to educate the renter and help the renter make an informed decision as to whether today is the best day to make his application. Where it doesn't work is when people are unhappy with their current apartment and want to start looking for somewhere else and it is hard to rent something at any price when your lease doesn'e expire for months.

MKC,

Water is a basic necessity, as is heat, and we have to pay for those. Some would say gasoline for a car is also a necessity, but those prices go up and down based on demand and what people are willing to pay. Unless you're in a socialist society, there will always be some demand-oriented pricing. It's a matter of what you want to buy and how much you are willing to pay for it.

MKC wrote:

However to come back a day later and the LRO price has increased $50 is ridiculous and predatory on a basic necessity such as housing.

We offer a 48-hour Guarantee on our quotes, and we've been very transparent about the systems with our prospective residents. So long as they submit an application and deposit within 48 hours of viewing the apartment, the price offered will stand. After that, it goes to market rate. We are also fortunate enough to have high enough occupancy that I can hold a price for a few days if it does change, with little ill effect to our overall numbers.

As a part of our quote guarantee, I also promise that if the price should go below what they were quoted during that time, they get the better deal.

I find that the communication and transparency of it has really helped us build a reputation as a resident-friendly community, compared to several of our neighborhood properties.

As a resident and former marketing associate for an MRO supply company, I think this is a horribly abusive practice to residents when it comes to lease renewals. It basically comes down to how much money can be squeezed from us in our decision to pay more and stay in our unit, or bear moving expenses to get a better deal at market rates. For example, lets say I'm paying a rate of $950 per month. I get my lease renewal offer and it's $1100 per month, yet the market rate for the same floor plan in the building is now $900 per month. Now, I can move and put turnover costs on you and pay a cheaper rate, but I have to balance that with moving expenses, application fees, etc. Clearly it has been statistically shown that residents will avoid moving and just pay the extra rate. It just goes to show that residents are not your clients, but the management stakeholders are. :silly: I'm done with this. No longer will I ever rent from a corporate management company that uses this pricing model and I'm determined to let others know about these practices so that they may make a more informed decision about from who they are renting. Shame on you all for abusing your tenants to make a couple extra percentage points.

"Can you imagine if they used LRO to price turkeys at Thanksgiving or eggs during Easter."
Have you ever tried to buy roses for Valentine's day vs other times of the year? This is exactly what they do - pricing always changes based on demand. And even without LRO, most communities are changing pricing dependent on market demands and availability, though not as quickly or often. If I have a unit, or unit type, that sits empty for a while, I absolutely run a special on that particular style to get it leased up. Likewise, if I only have a couple 1 bedroom apartments coming available, you better believe any other promotions we're running at that time won't be applied to them. LRO just takes the guesswork out of it.

MKC, I'm wondering if I misunderstood your post. This is a business and as such, (most) companies are in fact in it for a profit. Cost of supply is based upon demand - that's a universal standard. The rental industry is flourishing in most areas however you also have to keep in mind that for several years the economy tanked and vacancy rates were consistently high - for years. Some businesses/properties are still catching up from that. I can assure you their bills and creditors didn't wait or tell them it's OK, you don't have to pay because it would be predatory of us to demand payment at this time.